Cowell, Frank and Cruces, Guillermo (2003) Perceptions of risk : an experimental approach using internet questionnaires. Distributional Analysis Research Programme; DARP 70, DARP 70. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.
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Building on previous studies on perceptions of inequality, welfare and risk we investigate the structure of individuals' rankings of uncertain prospects in terms of risk and their relationship to individual preferences. We examine three interlinked propositions that are fundamental to the standard economic approach to risk: (i) that rankings by risk are simply the reverse of ranking by preference over distributions with a given mean; (ii) that risk-rankings respect the principle of mean-preserving spreads; (iii) that risk-rankings are independent of whether the individual is personally involved in the gains/losses associated with the uncertain prospects. To do this we use a set of questionnaires implemented through the Virtual Laboratory, a novel experimental setting for the study of normative issues in experimental economics. The results from the questionnaires provide an evaluation of the similitude between individual perceptions of risk and theoretical axioms. They also help identify the individual characteristics that might affect such perceptions.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 2003 Frank A Cowell and Guillermo Cruces|
|Uncontrolled Keywords:||Inequality, risk, experiment, transfer principle, mean-preserving spread|
|Library of Congress subject classification:||H Social Sciences > HB Economic Theory|
|Journal of Economic Literature Classification System:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C13 - Estimation
D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
|Sets:||Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Research centres and groups > Centre for Analysis of Social Exclusion (CASE)
|Identification Number:||DARP 70|
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